European Economy


What happens if Greece is pushed too far?

Another week in the history of the European economic mess  and, aside from the Ukraine, it’s all eyes on Greece. As I mentioned 2 weeks ago I feel this entire episode is far too politically innocent on the Greek side and the idea that the Greeks could simply front up to the Troika and say “let’s


Pettis: Europe is a war of bankers not nations

Cross-posted from Michael Pettis‘ blog: European nationalists have successfully convinced us, against all logic, that the European crisis is a conflict among nations, and not among economic sectors. Today’s Financial Times has an articlediscussing the travails of Greece’s new Finance Minister, Yanis Varoufakis as he takes on Germany: In a small but telling sign of the


Greece’s next act

Nearly 4 years ago I authored a post on MB titled “Greece’s inevitable default” in which I outlined why I suspected that Greece would continue to stumble from bailout to bailout while the economy slowly imploded. … I am simply going to explain what has happened so that I can explain why under the current


Greek election looms as ECB weighs QE

by Chris Becker It’s getting close to three very important dates on the economic calendar that all investors should watch and prepare their risk management accordingly. First, the German 2014 GDP print later this week will precede the first ECB meeting of 2015 on the 22nd of January where some sort of QE program is likely


Can Germany save the Euro?

Cross posted from The Conversation by Gregory T. Papanikos Honorary Professor, Department of Economics at University of Stirling Germany has sent the message that a Greek exit from the eurozone might be the lesser of two evils. It has been interpreted as a warning to the Greek electorate ahead of its January 25 election as


Eurozone slips into deflation

by Chris Becker Normally, you should cheer on lower inflation as your disposable income becomes more valuable. And with oil prices falling and mortgage rates at record lows, its doubly cheerful! But in Europe, unless you’re German, tough luck. Overnight we saw two very important prints that will shake the ECB up when it meets


Will the Grexit happen this time?

by Chris Becker We’re seeing two stories emerge from yet another Greek crisis over the weekend, as the people head to the polls for what is likely to be a lose-lose election outcome. First, the real occupiers of power in Greece, the Germans, publicly contend that they want the beleagured nation (or is it dominion?)


The ECB dilemma

From Westpac’s Elliot Clarke: At its simplest, the purpose of the ECB’s recently announced asset purchase programs and the TLTRO’s are to repair the policytransmission process through the provision of liquidity to the system and (it is hoped) confidence to market participants. The dilemma for the ECB is that there is no real guarantee that borrowers are willing


Goldman sees new European recession

Last night the EU cut its growth forecasts again. The European Commission said it now expects gross domestic product in the eurozone to grow 0.8% this year, down from 1.2% it forecast this spring. Goldman Sachs models are now seeing renewed contraction: RETINA retreats further into Q3 contraction Bottom line: We are less than a fortnight away from


Germany dug its own hole

by Chris Becker It doesn’t get any better for the EU/EZ with its powerhouse economy – and where the real power resides – Germany again showing signs of a very steep slowdown. Last night saw the release of a whopping near 6% reversal in exports for August: This release confirms the shocking factory orders print,


Germany shrinks

By Chris Becker Last nights monthly industrial production stats for Germany – the powerhouse of the great European experiment – were shocking, down 4% month on month and reversing to a nearly 3% retraction on an annual basis. There is now open talk of Germany possibly going into recession, joining its southern “brothers” as the


Draghi fumes as Naples burns

by Chris Becker ECB President Mario Draghi failed to provide two solutions last night following the ECB’s monthly rate meeting, where the refinancing rate was kept at 0.05% and deposit rates in the negative. First, no real solution to the ongoing European deflation/unemployment quagmire and secondly, no pumping of the asset markets with liquidity to


Euro unemployment remains high

by Chris Becker Last night saw the release of monthly unemployment statistics for the EU, and specifically Germany and Italy alongside the monthly CPI print. Although there has been almost no monthly change the readings are still way too high (even for the Germans): German unemployment (September) at 6.7% (no change on last month) Italian unemployment


US inflation moderates as Europe deflates

by Chris Becker Last night saw the release of two key important metrics in the ongoing fight against deflation in the Northern Hemisphere by the ECB and the Fed. First, following some very lacklustre Euro-wide consumer confidence figures (something that’s been repeated worldwide), the very closely watched German CPI print for September came in as dead


A tale of two continents

by Chris Becker The divergence between the US and European economies, including that of the real central power in Germany, continues with the recent economic data reinforcing this belief. Earlier in the week the monthly manufacturing and services PMIs were released and Germany surprised on the all important former with a result barely scraping above


Draghi mulls QE to revive deflating Europe

by Chris Becker The ECB President, Mario “whatever it takes” Draghi is letting the QE cat out of the bag stating last night that he wants governments to do some heavy lifting on restructuring while he grabs the “unconventional” printing lever: The ECB stands ready to use additional unconventional tools and tweak its existing efforts


Comedy relief from the ECB

by Chris Becker You know, there’s no shortage of derision on tap when it comes to central bankers these days – and the European flavour does not disappoint this morning, following the G20 finance minister/central banking wow-pow in Cairns this weekend. From Bloomberg: “We will judge the combined effects of the measures, the measures of


European growth splits and risks

From Westpac’s excellent Elliot Clarke: Through 2014, we have cautioned over becoming too optimistic about the likely trajectory of European growth. The nil result in Q2, preceded by six negative quarters then four (soft) positive results, gives credence to this position. Underlying this soft aggregate growth trend is a tug-of-war between reform and growth-stifling rigidities; the result will determine the


Portugal seizes its largest bank

Risk markets might get a fillip from this today: Portugal will spend 4.9 billion euros ($6.58 billion) to rescue its largest listed bank, testing the euro zone’s resilience to another banking crisis just months after Lisbon exited an international bailout. The rescue of Banco Espirito Santo, which was unveiled after a frenzied weekend of discussions between Portuguese


What comes after European austerity

Cross-posted from The Conversation: Even Angela Merkel now seems to agree that austerity has run its course. When Italy’s prime minister, Matteo Renzi, together with other European leaders, led a fresh charge against the ill-fated policy after the European elections, Berlin caved in surprisingly quickly. The details remain to be worked out but it seems


Europe’s creditless recovery stumbles on

From Westpac’s excellent Elliot Clark: Over the past year, a modest, patchy uptrend in consumer demand has begun to take shape in the Euro Area, with consumption growth up 0.4%yr in March. Following almost two straight years of decline, this growth could either be seen as a burst of pent-up demand which will prove fleeting,


ECB warms up a frozen Euro

  by Chris Becker The currency wars continue! Ever since the GFC, a host of other acronyms has entered the lexicon as global central banks put up various parts of a “Wall” to stave off the White Walkers of deflation. This week ECB President Mario Draghi announced some more along with the tried and true


ECB fires first shot of many

Fresh from Westpac’s Elliot Clarke: The decision made at the June ECB meeting was broadly as expected. Draghi had all but confirmed a change of tack at the May meeting; and, since that time, leaks from ‘well-placed’ sources provided colour on the likely structure of the policy action. Not being in a position to fully


Can Europe’s creditless recovery continue?

Fresh from Westpac’s Elliot Clarke. With growing concerns over deflation and very little room to move on interest rates, the May ECB meeting brought Euro Area credit trends back to the forefront of investors’ minds. As at March, total loans to the resident private sector were 2.2% lower than a year ago. This is not


Europe’s “creditless recovery”

Cross-posted from Sober Look: The story from the Eurozone is beginning to sounds like a broken record. The area’s monetary conditions continue to tighten as the Eurosystem’s balance sheet shrinks. The decline is driven by banks’ deleveraging, as the LTRO balances decline. As a result of bank deleveraging, loans to area’s households are now growing


Kiev placates as separatism spreads

From the FT: Western governments struggled to present a united front to Moscow over the crisis in eastern Ukraine as pro-Russia separatists seized further government buildings in cities and towns in the region and defied a deadline from Kiev to surrender. Oleksandr Turchynov, Ukraine’s acting president, appealed to Ban Ki-moon, UN secretary-general, to deploy peacekeepers


More ECB easing is coming

From Credit Agricole: The ECB’s assessment of price and activity conditions was fairly unsurprising. March HICP inflation was dragged down (to a record low of 0.5% YoY) by calendar and base effects; long-term inflation remain anchored; the recovery remains intact despite external risks; and weak credit flows to the private sector are a consequence of


Eurozone recovery continues

From Markit overnight: Flash Eurozone PMI Composite Output Index(1) at 52.1 (51.7 in November). Three-month high. Flash Eurozone Services PMI Activity Index(2) at 51.0 (51.2 in November). Four-month low. Flash Eurozone Manufacturing PMI(3) at 52.7 (51.6 in November). 31-month high. The grinding Eurozone recovery continues. It’s not going to light up the world but the


Will Merkel steer back to austerity?

Once again the data coming out of the Eurozone is looking up, with the latest PMIs showing a broad improvement in both services and manufacturing indexes. Flash Eurozone PMI Composite Output Index at 52.1 (51.5 in August). 27 – month high. Flash Eurozone Services PMI Activity Index at 52.1 (50.7 in August). 27 – month